DISTRICT COURT CASES

Judge in the Northern District of California Excludes Damages Expert Opinion that Used the Entire Handset as the Royalty Base

Judge Grewal of the Northern District of California granted defendant’s motion to exclude opinions and testimony of plaintiff’s damages expert. The court found that the expert’s methodology in calculating both the royalty base and the royalty rate violated the standards of Fed. R. Evid. 702 and 703 and Daubert v. Merrell Dow Pharms. Inc. The expert used the entire handset unit as the royalty base, namely the iPhone 4, 4S, and 5 and iPad 2nd generation. The handset was used as the royalty base even though the accused feature was just one feature of the baseband processor of the accused products. The court concluded that the expert ignored the entire market value rule by failing to link the demand for the accused product to the patented feature and by failing to apportion the value of the patented feature against the vast number of non-patented features in the accused products to arrive at an apportioned royalty base. The court rejected plaintiff’s argument that the iPhone and iPad are the smallest saleable unit because throughout the litigation, plaintiff took the position that the infringing functionality lies in the baseband processor, not the accused product as a whole. The smallest saleable unit must be closely tied to the patent, and the expert failed to take that into account. In calculating the royalty rate, the expert relied on licenses secured in settlement of plaintiff’s various patent infringement cases without making a comparable link to the patent-in-suit. The court determined the experts approach was also flawed because he relied on a maximum, cumulative royalty rate without a showing that anyone had committed to such a notion. Lastly, the court concluded that because the damages expert failed to allocate a value to the invention claimed in the asserted patent, his opinions would not be admitted, but provided plaintiff the opportunity to submit a new damages expert report in line with the guidance provided in the court’s order.

Joinder Appropriate if it Will Not Unduly Complicate or Delay the Initial IPR

In its decision on a motion for joinder, a PTAB panel granted petitioner SAP’s motion to join its inter partes review (IPR) proceeding with the already underway IPR2013-00586 (Unified IPR). Under 35 U.S.C. § 315(c), the director, in his or her discretion, may join as a party to an already initiated IPR, any person who properly filed a petition under 35 U.S.C. § 311, where that petition warrants institution of review. Here, SAP argued that joinder would promote efficiency, but not delay the pending Unified IPR. The patent owner opposed joinder, arguing that SAP had not “identif[ied] any compelling reasons why joinder is appropriate.” The Board explained that the petitioner’s reasons do not have to be “compelling.” SAP stated that it would withdraw its expert declaration and rely on the evidence already submitted in the Unified IPR. SAP also proposed that the Board order consolidated filings for which Unified would be responsible. The Board granted SAP’s motion to join because its IPR petition raised no new issues as compared to the Unified IPR petition, SAP’s proposed procedural protections allowed Unified to retain control over the joined proceeding, and SAP’s protections prevented the need to alter the scheduling order. Granting SAP’s motion to join under those circumstances would not unduly complicate or delay the Unified IPR. The Board ordered IPR2014-00306 joined with IPR2013-00586.

First Successful Motion to Amend Claims in an Inter Partes Review Proceeding

For the first time since the inception of the IPR process, the Patent Trial and Appeal Board has granted a patent owner’s motion to amend claims. The patent at issue relates to a method of using a chemical compound to repel insects. The Board instituted review of all the challenged claims and the patent owner filed a motion to amend. In analyzing the patent owner’s motion, the Board explained that proposed amendments to claims require a patentability showing by a preponderance of the evidence. According to the Board, a motion to amend must meet three requirements: 1) the proposed substitute claims must not broaden the scope of the original claims; 2) the patent owner must set forth the support in the original disclosure of the patent for each amended claim; and 3) the patent owner must demonstrate patentability of the proposed claims over the prior art in general, not just the prior art applied to the original patent. As to the third requirement, the Board further noted that a patent owner is not required to be aware of every item of prior art presumed to be known to a hypothetical person of ordinary skill in the art. Rather, the patent owner should explain and present evidence, when appropriate, as to the level of ordinary skill in the art, and what was known regarding the feature being relied upon to demonstrate patentability of the proposed claims. In this case, the patent owner provided several publications as well as an expert declaration to demonstrate the level of ordinary skill in the art and the unobviousness of the features being relied upon to demonstrate patentability. The Board concluded that such evidence was sufficient for the patent owner to prevail in this case and, therefore, granted the motion.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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